Foreign funds turn net sellers of local bonds

Foreign funds reduced their exposure to local bonds to RM180.1 billion last month, the lowest level recorded since March 2017, said Malaysian Rating Corp Bhd (MARC).

In its monthly bond market and rating snapshot, the rating firm said foreign investors turned net sellers of local bonds, disposing of RM9.8 billion of Malaysian Government Securities, after two subsequent months of inflows since February.

MARC said this was due to concern that Malaysia might be dropped from the Norway’s US$1 trillion sovereign wealth fund (SWF) and the FTSE World Government Bond Index’s (WGBI) bond holdings.

FTSE Russell had placed Malaysia on its watchlist to review the participation of Malaysian government bonds, or govvies, in the WGBI.

Foreign ownership of local bonds fell to 12.5 per cent of the total outstanding as foreign investors reduced their holdings following the SWF and FTSE Russell announcements.

MARC said the local bond market recorded total net outflow of RM4.7 billion year-to-date, compared to RM1.3 billion in the January-April period last year.

Meanwhile, the MGS and Government Investment Issues (GII) contributed to most of the outflows, followed by corporate bonds and treasury bills.

Ringgit also continued to fall against the US dollar last month amid expectations that Bank Negara Malaysia would cut the Overnight Policy Rate by 25 basis points this month against the backdrop of a possible growth slowdown.